At least 42 people including 12 soldiers and 30 rebels have been killed in fighting in the remote Tajik region of Gorno-Badakhshan, state television has reported.
Some unconfirmed reports speak of a far higher level of casualties, with dozens of people being killed in the violence.
It follows the fatal stabbing of a top security forces official on Saturday.
That led to military action against local opposition strongman Tolib Ayombekov, reports say.
Residents of the provincial capital Khorog told the BBC their town now resembled a warzone.
Communications in Gorno-Badakhshan province have now been cut.
People are trapped in their homes because of the heavy fighting in the streets, where armoured vehicles have been seen. Dozens of people have been reported wounded.
A hospital official in the Tajik capital Dushanbe - where some of those injured have been treated - told the BBC's Central Asian Service that more than 200 people were killed on Tuesday.
The dead included more than 100 military personnel and about 100 civilians, he said.
The official - who did not want to be named - said that about 60 people were injured in the violence.
State television said that police detained 40 armed men on Tuesday, including eight Afghans. It said that 23 soldiers were injured in the operation in Khorog - but there were no civilian casualties.
Security forces say they decided to use force after Mr Ayombekov refused to surrender.
Mr Ayombekov was a member of the opposition which fought against the government during Tajikistan's civil war in the 1990s.
The operation is yet another attempt by the Tajik government, which has little influence in the area, to bring Gorno-Badakhshan under its full control, says the BBC's Abdujalil Abdurasulov.
The pre-dawn attack on fighters loyal to Mr Ayombekov deep in the Pamir mountains underlines the continuing instability of the impoverished former Soviet republic 15 years after the end of a civil war, correspondents say.
It took place three days after State Committee on National Security (GKNB) regional head Abdullo Nazarov was found dead.
Residents in Khorog told the Reuters news agency that locals had been ordered to stay at home as government helicopters flew overhead. They said that gunfire could be heard in the distance.
A statement released by the GKNB said that investigations were under way to see "whether the citizens of Afghanistan" involved in the violence were connected with the Taliban, al-Qaeda or the Islamic Movement of Uzbekistan.
While such claims are difficult to verify, our correspondent says the area remains a base for former rebel fighters.
A former Soviet republic, Tajikistan plunged into civil war almost as soon as it became independent from the Soviet Union in 1991. It is Central Asia's poorest nation.